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The outsider CEOs
Never before have we seen three new CEOs step up to the helm of the biggest global custodians at
the same time, and never have there been three new CEOs all considered as ‘outsiders’ or ‘wildcards’.
W
elcome to the helm of the world’s
top global custodians: Charles
Scharf of BNY Mellon, Michael O’Grady
of Northern Trust, and from 2019, Ron
O’Hanley of State Street.
A recent Wells Fargo research report by
Mike Mayo, a well-known Wall Street an-
alyst, describes the investment spending
by the new CEOs as a “wildcard” for the
three banks.
“The three new CEOs, all relative
outsiders, have an unstated mandate to
better monetise their platforms. The
greatest long-term upside potential is if
one of these firms could lead the industry
enough to obtain a FinTech type premi-
um,” the report said.
All three have come from either outside
of the custody or the banking business as
opposed to their predecessors.
O’Grady previously oversaw Northern
Trust’s wealth and asset management
businesses, O’Hanley currently serves as
head of State Street’s global asset man-
agement arm, and while Scharf previously
served time at JP Morgan, he is best
known for his time as CEO of Visa.
The fact that these three new CEOs
come from backgrounds outside of cus-
tody means they will most likely bring
a different view to how to monetise the
business and generate new revenue flows.
At Northern Trust, O’Grady takes over
a steady and stable business which in the
past has not been caught up in the scan-
dals that BNY Mellon and State Street -
see below - have had to face.
It is easy to see that the wealth man-
agement business could become an even
more central part of the bank’s global
business. Over the past decade, the wealth
management business has grown just
as fast as the S&P 500, making it one of
Northern Trust’s top asset gatherers.
Northern Trust is perhaps in stark con-
trast to BNY Mellon, which over the past
82
Global Custodian
Summer 2018
year has given its asset servicing business
a complete makeover. With no Brian
Shea, the long-time CEO of BNY Mellon’s
Pershing and its investment services unit,
steering the business, it is likely Scharf
will bring a new focus to technology and
payments.
At his first investor services day this
month, Scharf highlighted that his bank
will increase its tech budget by $300 mil-
lion to $2.7 billion for the year and aims
to provide the “best operating platform in
the business.”
Arguably the biggest question mark
surrounds State Street’s O’Hanley. He
originates from global consultancy firm
McKinsey, where he founded the invest-
ment management practice worldwide.
He had since held leadership roles at the
asset management business of BNY Mel-
lon, Fidelity, and now State Street Global
Advisors.
O’Hanley has the mammoth task of
rebuilding State Street’s culture. While it
has taken tremendous steps in promoting
ESG investing and diversity within the
business and wider capital markets, it has
in the past been embroiled in a number of
scandals.
However, the good news is that State
Street is one of the best performing banks
out of the three global custodians, hav ing
seen its assets under custody increase
15% over the year to $33.1 trillion. Fur-
thermore, State Street’s “Project Beacon”
looks to more fully evolve the bank to
become a digital enterprise that better
anticipates and reacts to real-time client
needs.
The advantage for both State Street and
Northern Trust with both of their CEOs
coming from the buy-side is that they will
bring with them their own experience
and perspective on what a custodian bank
needs to offer to its clients.
“Customers will value this knowledge
Joe Parsons,
Deputy Editor, Global Custodian
of their business – a trait that is always
rated highly in custodian evaluations.
The CEOs from the buy-side will have a
sense of what is essential to retain and
attract business. It will be interesting to
see how well they can switch to a service
provider mentality, as they discover what
is actually achievable,” said Dayle Scher,
senior analyst for global research firm
TABB Group.
“They will need to combine their tech
savvy with their empathy for their clients
when considering new product lines that
add value and revenues, again without
sacrificing the quality of the services that
are table stakes.”
These CEOs need to embrace technol-
ogy and automation along with a greater
focus on big data, digital transformation
and cyber security this year as a way to
meet client demands. For these three out-
siders bringing a fresh new perspective to
an otherwise tired business could be the
key in propelling the industry forward.